The bill introduces significant revisions to trust law in South Dakota, particularly focusing on the reimbursement of trustors for personal income tax liabilities under specific conditions, as long as the governing instrument does not prohibit such reimbursements. It clarifies that the cash value of life insurance policies held in the trust cannot be used for these reimbursements and ensures that the trustor's ability to receive such payments does not classify them as a beneficiary for certain legal purposes. Additionally, the bill protects trustees, trust advisors, or trust protectors from liability for decisions made under these new provisions, which will apply only to trusts created or administered in South Dakota after July 1, 2026.

Further amendments address the appointment of assets to a second trust, ensuring that restricted trustees cannot benefit themselves or improperly alter the distribution of the first trust. The bill also clarifies that property from a revocable trust is not considered an advancement against a beneficiary's share unless explicitly stated and protects communications between attorneys and fiduciaries under attorney-client privilege. It modifies the conditions for creditors to bring claims regarding fraudulent transfers of a settlor's assets, specifying timeframes and requirements. Additionally, the bill updates the definition of South Dakota special spousal trusts in relation to community property laws, ensuring that such trusts will be recognized as established under these laws effective January 1, 2026, and that community property retains its classification when transferred to a South Dakota special spousal trust.

Statutes affected:
Introduced, 01/19/2026: 55-2-15, 55-4-33, 55-16-10, 55-17-5